The General Belgrano sinks after it was hit by three torpedos from a British submarine during the Falklands war in 1982. Photograph: AP

Nobody ever thought the General Belgrano would give Argentinians reason to cheer but that's because nobody, until now, thought to name the nation's football league after the sunken ship.

The Argentinian government plans to name the first division, which kicks off this Friday, in honour of the navy cruiser sunk by Britain during the Falklands war in 1982 with the loss of 323 Argentine lives.

Military defeat, trauma and humiliation: not typical ingredients for sports sponsorship, but amid a fast-escalating diplomatic row between London and Buenos Aires these are anything but normal days.

The president, Cristina Fernández de Kirchner, has mobilised much of Latin America behind Argentina's diplomatic and commercial squeeze on "las Malvinas", its name for the disputed islands 300 miles off its Atlantic coast, in the runup to the war's 30th anniversary.

Its latest gambit would turn Argentina's vocal, ultra-passionate football following into an enduring source of resentment and nationalism.

The executive committee of the Argentine Football Association (AFA), which relies on state funding, will discuss the proposal on Tuesday night. Argentina's government owns the rights to first division matches and shows the games on free-to-air television. It regularly uses advertising opportunities for political promotion.

If the AFA approves the government plan, hoardings are expected to show "Crucero General Belgrano" – Cruiser General Belgrano – at Friday's opening game between the reigning champions, Boca Juniors, and Olimpo.

The prospect divided Argentines, with blogs hosting debates between those who felt it would honour fallen heroes and those who sensed political opportunism and jingoism.

The British nuclear-powered submarine HMS Conqueror sank the cruiser with three torpedoes on 2 May 1982. It was outside the British-declared exclusion zone but the prime minister, Margaret Thatcher, ruled it was a threat and approved the attack.

The loss of life and firepower shocked Argentina's ruling military junta. The Sun's famous headline, "Gotcha", aggravated the nation's anger and grief.

Rivero led a group of Argentinian labourers and creole Indians that killed five prominent British settlers, becoming, over time, a folk hero on the mainland. Some historians said the rebellion was a dispute over pay and conditions, not politics, and that Rivero was a common murderer.

After a decade-long diplomatic thaw, tensions over the islands rose last year when British companies began drilling for oil offshore. The dispatch of the destroyer HMS Dauntless to the area and the arrival Prince William, who last week began a six-week stint as a search-and-rescue pilot in the archipelago, further inflamed Buenos Aires.

Kirchner's office said she would make an important announcement about the islands from the presidential palace on Tuesday night.